SBP injects nearly Rs1.6 trillion into financial market

WEB DESK: On Friday, the State Bank of Pakistan (SBP) carried out a reverse repo and a Shariah-compliant Modarabah-based Open Market Operation (OMO), injecting a significant total of Rs1.59 trillion into the financial market.

Interestingly, the SBP received no bids for the Shariah-compliant Modarabah-based OMO, indicating a lack of interest from participants in that specific operation.

According to Mettis Global, open Market Operations are essential tools used by the SBP to manage the liquidity in the banking system. This is done by either infusing funds into the market or withdrawing excess cash.

When the SBP conducts an OMO to inject funds, it lends money to banks and primary dealers against eligible securities, helping to alleviate liquidity shortages.

For these injections, the eligible securities include marketable government securities such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs).

Conversely, in operations designed to withdraw excess liquidity (referred to as OMO mop-ups), the SBP sells MTBs to banks in exchange for funds, thereby tightening the money supply in the system.

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